(Boise) – Prescription drug manufacturer SmithKline Beecham Corporation, doing business as GlaxoSmithKline, agreed to pay $2.6 million in a legal settlement resolving Idaho’s claims relating to the “average wholesale prices” reported by the companies, Attorney General Lawrence Wasden said. Since filing lawsuits in 2005, Wasden has resolved 14 average wholesale price matters with drug manufacturers, including this settlement, resulting in more than $20 million recovered.

Idaho Medicaid provides health care services, including prescription drugs, to low-income Idahoans. By law, Idaho Medicaid must reimburse pharmacies at the “estimated acquisition cost” of the drug. Idaho Medicaid primarily uses “average wholesale price,” as reported by drug manufacturers, as a basis for determining this amount.

If the manufacturer reports an inflated or false average wholesale price for a drug, taxpayers can pay too much for that drug through Medicaid reimbursements. For example, one unit of GlaxoSmithKline’s pharmaceutical product Wellbutrin had a published average wholesale price of $2.012 in 2003, but Wasden’s investigation revealed an actual average wholesale price of $1.590 in 2003. This results in a 27% difference between the published price and the actual price.

“The publishing of false drug prices harms taxpayers and the State,” Attorney General Wasden said. “My office has investigated and litigated this matter and what we uncovered is that in a very large number of instances, drug manufacturers reported false and inflated prices for their drugs.”

The $2.6 million settlement is intended to reimburse taxpayers for the State of Idaho’s share of the excessive prices Idaho Medicaid paid for prescription drugs as a result of inflated average wholesale price reporting. More than $620,000 will be deposited in the State’s General Fund to be appropriated by the Idaho Legislature. About $1,544,000 will be deposited into the Cooperative Welfare Fund to reimburse the federal government for its share of the Medicaid overpayments. This money will be retained by Idaho as an offset against a future federal Medicaid payment. $50,000 will go to the consumer protection account to reimburse the Attorney General for investigative and legal costs.

The settlement with GlaxoSmithKline has been approved by the Fourth District Court in Ada County. The company admitted no liability or wrongdoing.

“This settlement addresses the harm incurred by Idaho’s taxpayers and the State,” Attorney General Wasden said. “It should stop the reporting of false and misleading drug prices and provide the State significant financial relief. This settlement is good for Idaho because it successfully resolves this dispute without the need for further, costly litigation.”

Three average wholesale price cases, naming eight other drug manufacturers, are still pending.